Behind the Elusive Employment Effect of the Minimum Wage: A Regression Discontinuity Approach

Taehee Oh and Jangyoun Lee

Hitotsubashi Journal of Economics, 2025, vol. 66, issue 2, 132-160

Abstract: In Korea, workers must receive a full dayʼs pay when they work over 15 hours a week. This study leverages this regulation to estimate the impact of minimum wage increases on labor market outcomes, exploiting a sharp discontinuity in the minimum wage rule at 15 hours worked (i.e., regression discontinuity designs) based on a longitudinal panel dataset. The estimation results reveal that, in response to the hourly wage jumping by 20 percent at the discontinuity, Korean employers seek to reduce their labor costs by cutting employeesʼ working hours to avoid paying statutory holiday pay instead of laying them off.

Keywords: minimum wage; regression discontinuity; longitudinal panel dataset (search for similar items in EconPapers)
JEL-codes: J21 J38 J42 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:66:y:2025:i:2:p:132-160

DOI: 10.15057/hje.2025007

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